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State-run health insurance plans
This article in The New York Times offers some detail on the government-run insurance plans at the state level. I learned:
1. Three dozen state governments currently run such plans and they do not in general drive private insurance companies out of business. In California, the largest such plan, two-thirds of all eligible people choose the privately-run health insurance plans.
2. The state-run plans are usually administered by a major private insurance company, which has authority to negotiate payment rates with doctors and hospitals. In this regard the forthcoming Obama proposal might be quite different.
3. These plans are not especially effective at controlling costs.
4. The North Carolina plan now requires a significant bailout.
5. Some people (this is now my esoteric reading) view the state-run plan as a way of forcing private insurance companies to bargain down reimbursements much further than they have done. It's a monopsonistic social means of opting for lower expenditures and lower returns for the medical sector.
Posted by Tyler Cowen on June 8, 2009 at 05:41 AM in Medicine | Permalink
Comments
Regarding point 5: I think people are hoping we can come up with a better compensation model in general. It's not just a question of paying doctors less, but finding a model that will pay them for needed procedures instead of just as many procedures as they would like to get paid for. People are looking at expenditures in European countries and wondering why ours are so much higher while there is no evidence our care is actually any better in terems of results. It is a pretty reasonable view. There's no assurance that we can fix it this way, but I think it's a worthwhile goal at the very least. Personally, I have no idea whether it will work at all. One of the big troubles with the healthcare in the United States is that there are actually two separate issues: 1) we pay way too much for healthcare (it seems) and 2) we have a terrible model of paying for healthcare. But it is hard to fix 2) without fixing 1).
Posted by: mpowell at Jun 8, 2009 6:30:06 AM
Three dozen state governments currently run such plans and they do not in general drive private insurance companies out of business. In California, the largest such plan, two-thirds of all eligible people choose the privately-run health insurance plans.
Hah!
;)
Posted by: Neal at Jun 8, 2009 6:52:39 AM
"People are looking at expenditures in European countries and wondering why ours are so much higher while there is no evidence our care is actually any better in terems of results."
It depends on how you define "results," specifically it means how much weight you give to things like catastrophic care. There is plenty of evidence that suggests our system better at producing favorable results for serious illness (once things are broken) in many and likely most cases for a larger number of people. That, however, is not what is typically measured in many studies that paint U.S. healthcare as inferior. Beginning with imperfectly described or understood evidence is not a good way to begin to solve a problem.
Posted by: PM at Jun 8, 2009 7:32:35 AM
"In California, the largest such plan, two-thirds of all eligible people
choose the privately-run health insurance plans."
And this is a ringing endorsement of government healthcare? What's the marginal
value of creating this choice? Or is the state run plan a cheap, rather than
inexpensive plan that's the insurer of last resort?
Yeah, I can't wait to defense department procurement practices, the postal
service' efficiency and the IRS compassion come between me and my doctor.
Then there's this little matter of constitutional authority, not that anything
would ever restrain beltway megalomaniacs and their imperial ambitions.
Posted by: Phil at Jun 8, 2009 8:09:26 AM
How do we know we are measuring healthcare outcomes rather than initial public health inputs? If Americans go to the doctor sicker, for whatever reason, then it seems obvious the services would cost more and outcome be worse. I haven't seen that paper yet, certainly not from the leftist commentators.
I assume they are referring to things like Blue Cross. These are evil. I'm generalizing. They creatively hide their "reserves" because they are "non-profit." They allegedly retain or spread work around as many lawyers in the state as they can so there will always be a conflict of interest if you need to hire one. This is hearsay. I don't know where this strawman came from that you have to destroy all your competition to be evil. People are evil when they can be. Bigness is bad. Just because you are big enough to screw doctors doesn't make it right, just because you don't like the price tag.
Posted by: Andrew at Jun 8, 2009 8:24:28 AM
The only way to drive down health costs is to replicate the situation of the '90s, with numerous HMOs competing against each other. And nobody liked the results, even though 90 percent of health claims were approved. Fast, cheap or good — pick two.
Posted by: Ted Craig at Jun 8, 2009 8:48:12 AM
Tyler, if the public option companies in these states are thought to exert significant control on the pricing structures of private insurance companies, then how do we know that they don't drive out other private insurers? It sounds like your (1) and (5) face a tension. I'm probably wrong about this, but could someone help me see why?
Posted by: Selfreferencing at Jun 8, 2009 9:04:54 AM
These are generally state employee or retiree plans, yes? Their eligibility is inherently restricted, though it is still interesting that they don't crowd out each plan.
But these are also a form of compensation and benefits for state employees in many cases, so it's not clear that they actually are run at a profit or could be expanded to do so. And since these only apply to state employees, it doesn't seem like they're all that different from particularly large companies having their own insurance plan, perhaps administered by a private company,
In any case, are they any cheaper or more efficient than private insurers? Or are they expensive plans subsidized by taxpayers?
Posted by: John Thacker at Jun 8, 2009 9:50:02 AM
The only way to drive down health costs is to replicate the situation of the '90s, with numerous HMOs competing against each other..
Seems to me the best way to achieve this is to abolish the insurance model in favor of fee for service. Where we find this in health care -- such as cosmetic surgery and elective surgery like Lasik -- we find little cost inflation and pretty good quality.
Now, insurance will always have a role in health care, such as for catastrophic events like cancer. But much of it should be fee for service.
An especially egregious example is dental insurance. This makes little sense. Dental care is for the most part about maintenance. Having insurance for predictable, routine costs is a formula for price inflation. Just think what would happen to auto insurance if it covered oil changes.
The best reform possible for health insurance would be to end the tax breaks for employer-provided health care. Not only would this help to fix the health care mess but it would also break the link between employment and health care, which promotes labor market inefficiencies.
Posted by: Colin at Jun 8, 2009 9:57:49 AM
Question: What will become of "ObamaCare" if it's "free"...but there are no doctors to dispense it? Seems to me the Donks are rapidly hurtling toward a "rearranging deck chairs on the Titanic" scenario.
Yup, this is going to work out just fine. (*Seinfeld eye roll*)
Posted by: MarkJ at Jun 8, 2009 10:22:53 AM
The State run plans are the solution chosen by those States to the requirement that everyone have an insurance option. The more common solution is a high risk pool that directs the uninsurable to insurers with cross subsidies to the rates to make them "affordable". When the State sets up its own insurance pool, the rules pretty much insure that the rest of the insurance industry can skim off the 80% of the people who are buying insurance who are low risk to low claim, leaving the high risk and high claim insured to be covered by the State which necessarily sets the rates higher than the market to limit the subsidies it needs to remain solvent.
In a market where the private parties can chose the customers that maximize their profit while shifting the lose generating customers to the government, isn't it obvious that the government will end up with all the money losing business?
And the US does have a massive government run insurance company, Medicare, but you never hear insurers calling for ending its operation so they can compete for the insurance of the old people. With the US providing health care insurance primarily vie employers, and by charity care cost transfers, insurers saw Medicare as good for their business - the cost of the low income uninsured old people would be transferred to the government instead of doctors and hospitals raising the prices for the insured employed to pay for the uninsured unemployed.
I would draw attention to the fact that the US tax payers pay on average more per person for government funded healthcare than the Canadian tax payer. I'm guessing that the government pays for the health care, and most is done by way of insurance (Medicare, Medicaid, government run insurers and government run and subsidized risk pools), of only 20-30% of the population. The for profit sector has skimmed off the cheap basic care and then focused on the high profit elective market, like fertility and sexual potency and body sculpting.
Posted by: mulp at Jun 8, 2009 11:25:03 AM
I grew up in New Zealand (A county with free universal/socialised health care where most people supplement this with cheap private insurance for non life threatening surgery*) and moved to the US about 5 years ago. It's been interesting to compare how the two systems work.
The first thing that amazes me about the US system is how much bureaucracy there is. The media would have you believe that universal health care equals huge bureaucracy, yet from my experience it's been the other way around. Instead of never getting a bill, a single routine visit to a doctor seems to generate multiple bills. How much money and time is wasted running multiple billing departments? What about the bureaucracy of health saving/reimbursement accounts? Why would government be inherently more inefficient? If it's a matter of waste then audit more (and its a myth that private business is more efficient anyway. Every business has some degree of waste).
You've also probably heard that universal health care means that someone in the government would make decisions about your health care. Well, I hate to break it to you, but someone already is, and it's called a business (who generally look purely at the bottom line). I know of people who are productive members of society, yet can't get affordable health care in the US because of preexisting medical conditions. My wife's Uncle (here in the US) was also initially refused coverage for cancer treatment, so instead of worrying about getting better, his family instead went through months of worrying if they were going to lose there house to pay for a family members medical treatment. They had decent health insurance, he just got the 'wrong' type of cancer. Most of us need health insurance, so even if it's isn't called a tax, that monthly insurance bill and deductible expense are the same thing (money you are required to spend).
"It will cost more" is another reason often heard against universal health care. Have these people ever been uninsured and gone to a doctor or hospital in the US?
I paid a similar amount of tax there, and didn't get a bill each month for medical insurance, or have a $2,500 family deductible. So unless it raises my tax by a couple of thousand a year, it's still cheaper. I've also shown medical bills from the US to my doctor in New Zealand and he was outraged at the cost. Why do routine medical things like blood tests cost so much more here? (Because they know they can charge your health insurance company so much?)
It also amazes me that a country that is supposedly so business orientated burdens businesses with health care. How much more money do business need to make
to cover health care expenses? How much bureaucracy is involved for the business? How many people don't start a business or are tied to an employer because they need the health insurance?
Universal health care isn't perfect, but from my own experience it isn't the monster that a lot of people in the US seem to believe it is.
* As I said, most people have limited private insurance. It's about $80/month for a family. It lets you jump a waiting list (yes they exist, mostly for minor/routine procedures.) for certain things. I know family members who had had old broken toes reset, tonsils removed etc.
Posted by: JB at Jun 8, 2009 11:59:07 AM
Even if we find magic combination of government and private health care, aren't costs going to continue to rise due to decreasing supply (healthcare workers) vs the demand (aging baby boomers)? I had read awhile back that the healthcare industry was going to face a shortage of workers, doctor's, etc. Unfortunately, I failed to remember the source. If my point is built on an deck of cards, then ignore :).
Posted by: Vindictive_{Pantz} at Jun 8, 2009 1:48:41 PM
No offense, but I really don't see how New Zealand (a nation struggling to keep its native population from leaving) offers any insight for the U.S. (a nation struggling to rationalize its incoming population).
Posted by: Ted Craig at Jun 8, 2009 2:26:13 PM
What do demographic shifts have to do with the efficiency of a health care system?
Posted by: Neal at Jun 8, 2009 4:27:20 PM
Did your wife's uncle go to New Zealand to get the necessary cancer treatment?
I love the "insurance sucks, so let's replace it with government insurance" arguments.
Posted by: Andrew at Jun 8, 2009 5:45:32 PM
>Did your wife's uncle go to New Zealand to get
>the necessary cancer treatment?
Probably not, as Ginny Postrel pointed out in March...
"New Zealand “is a good tourist destination, but options for cancer treatment are not so attractive there right now,” Richard Isaacs, an oncologist in Palmerston North, on New Zealand’s North Island, told me in October."
http://www.theatlantic.com/doc/200903/postrel-drugs
Posted by: Dr Matt at Jun 8, 2009 6:58:25 PM
I live in North Carolina and I am currently on the state plan. The only people who are on the state plan are state workers and their immediate families. Teachers (I am a teacher) get a free basic insurance (no monthly fees). The new proposal is that all people who are not within their weight bracket (by height) must pay, beginning a few years from now. At this point, since I already only make 30K, I would be better off getting another job, since there is no possible way I can lose enough weight to fit in the small bracket, which barely anyone fits into.
Posted by: Jessica at Jun 8, 2009 7:52:24 PM
An especially egregious example is dental insurance. This makes little sense.
It does make some sense: how much is an empirical question. If you have dental insurance you are more likely to a) get regular dental check-ups to take care of cavities while they are still manageable and b) at least have a regular dentist who can see you on an emergency basis when something goes wrong.
In the absence of a) and b), you have more people going to the emergency room for root infections that have gone out of control. These really are emergencies as the infection can be lethal if not treated aggressively with anti-biotics and emergency oral surgery. This happened to me during a lapse in my dental insurance (although I did have a regular dentist and got regular check-ups) and cost me about $2500-$3000 out of pocket for surgery + root canal + crown. I had savings but I can imagine other people running up credit card debt in a situation like this. People without credit cards would have had to go to a public hospital or clinic and run up even larger bills that they wouldn't be able to pay.
Posted by: Ricardo at Jun 9, 2009 2:34:25 AM
There is plenty of evidence that suggests our system better at producing favorable results for serious illness (once things are broken) in many and likely most cases for a larger number of people. That, however, is not what is typically measured in many studies that paint U.S. healthcare as inferior.
I suppose you could be referring to studies showing that cancer is treated with a higher record of success in the United States than in Europe? But then the same studies show that the mortality rate from cancer in the United States isn't any lower. This focus on treatment related results is no better than focusing on total health outcomes. The former has a two sources of bias, first not recognizing the harms of marginal treatments and secondly grouping marginal, less dangerous cases into the group of 'successfully' treated illnesses. The latter, as you point out, cannot do anything to control for health inputs. Neither is a clear winner in determining quality of care.
Alternatively, one could ask why the burden of proof isn't on the other side to show that the additional dollars we spend are actually worth it when the available evidence is mixed at best.
Posted by: mpowell at Jun 9, 2009 7:22:18 AM
That's a good point, mpowell. On whom does the burden of proof lie?
You know, facetiously, one might posit that the extra US health care costs are a measure of how much the US values not having government-run health care.
Posted by: Neal at Jun 9, 2009 8:13:30 AM
I wasn't saying that the health care system in New Zealand was perfect. It has it's problems. Herceptin isn't the best example though because it was as much about politics (should we raise taxes to pay for increasing medical expenses. It's interesting that the new 'conservative' government had a campaign policy of fully funding it, even although they are usually against increasing government spending on health care) and how treatments are approved in New Zealand. That said, this is one of the biggest challenges facing the NZ health care system.
My point was that "universal health care isn't the monster that a lot of people seem to believe it is". Bureaucracy was limited, it didn't cost more, business was not burdened with health expenses, and care is cheap and accessible for most of the population.
Posted by: JB at Jun 9, 2009 12:11:53 PM
I have to wonder why our nation this year decided to take on all the "ills" at once .... when those "ills" affect less than 10% of our population.
Less than 10% of our mortgage holders were not paying their mortgages...so our Nation's financial security is put at risk? Especially when a lot of these people knew they could not afford that house when they bought it, were living horribly above their means OR were flipping to try to take advantage of the "bubble" and lost.
Now less that 10% of our citizen currently do not have health care. (I know about the inflated 47 million...but sorry I am not counting illegal aliens or people who make over $75,000 a year and elect to spend their money on something else).
If a person is in that "less than 10%" ... how percentage of them were born into welfare and have been on the government hand outs all their lives?
When did it become my responsibility to pay for someone else's irresponsible behavior.
Yes, there are exceptions...but you don't build a business, a government or health care on exceptions.
Health Care is not a RIGHT, it is a responsibility. You don't bring children into this world that you can not properly care for. American Society has to many :OctoMoms: .... they simply had them one at a time.
Tennessee tried this and failed. Hawaii tried it and failed. California is handing out IOUs (now there is a ringing endorsement)....
Personal responsibility is the only answer that works.
If you don't have a nation where that is the foundation... you are doomed.
Posted by: Leigh at Jun 25, 2009 11:55:09 AM
I have to wonder why our nation this year decided to take on all the "ills" at once .... when those "ills" affect less than 10% of our population.
Less than 10% of our mortgage holders were not paying their mortgages...so our Nation's financial security is put at risk? Especially when a lot of these people knew they could not afford that house when they bought it, were living horribly above their means OR were flipping to try to take advantage of the "bubble" and lost.
Now less that 10% of our citizen currently do not have health care. (I know about the inflated 47 million...but sorry I am not counting illegal aliens or people who make over $75,000 a year and elect to spend their money on something else).
If a person is in that "less than 10%" ... how percentage of them were born into welfare and have been on the government hand outs all their lives?
When did it become my responsibility to pay for someone else's irresponsible behavior.
Yes, there are exceptions...but you don't build a business, a government or health care on exceptions.
Health Care is not a RIGHT, it is a responsibility. You don't bring children into this world that you can not properly care for. American Society has to many :OctoMoms: .... they simply had them one at a time.
Tennessee tried this and failed. Hawaii tried it and failed. California is handing out IOUs (now there is a ringing endorsement)....
Personal responsibility is the only answer that works.
If you don't have a nation where that is the foundation... you are doomed.
Posted by: Leigh at Jun 25, 2009 11:55:38 AM
Posted by: 家教 at Aug 17, 2009 12:50:35 AM
